Company formation, start-ups

Legal advice and contract drafting for start-ups

We’re here to support you From start-up through to financing and on to a potential successful resale – the „exit“.

The bad news: For start-ups, the worst is yet to come right at the start.
Everything is new; the business needs to be organised and processes need to be established. Everything has to fit into the agile and often ever-changing dynamics of a start-up. And all of this on a tight budget.

The good news is: That’s perfectly normal, and it works somehow.
Drawing on our many years’ experience with start-ups, we will work with you to find a solution that caters to the diverse range of interests.

For start-ups, we offer special terms designed to preserve liquidity until the first round of funding. Please feel free to get in touch with us about this!

Pre-launch phase – don’t cut corners in the wrong places!

The life of a start-up begins with a strong idea and a strong team: business models are developed and tested, and the first prototypes are built. The aim is eventually to set up a limited company to run the business that has been conceived – the actual incorporation. But even before that, tax and company law come into play.

At this early stage of the start-up’s development, it is highly likely that the individual parties involved – that is, the ‘mothers and fathers’ of the idea – have already formed a civil-law partnership, without any written contracts having been drawn up.

As long as everything goes smoothly, this may be sufficient. But one soon reaches the limits: new partners join, some partners no longer work to their full potential, or may even wish to leave the venture. How should such founders be given a stake in a future limited company? How should they be compensated? Who owns the rights to the work created by a departing co-founder? It is therefore advisable for all founders to agree in advance on a set of rules that takes such scenarios into account.
We're happy to help here.

However, even day-to-day tasks – such as ongoing bookkeeping and the tax planning involved in the various transactions within the start-up – take up a great deal of the founders’ time and energy – time and energy that is then lacking for the actual product. Professional advice in this area saves considerable resources, which are in short supply during the start-up phase and are therefore costly. It is more cost-effective to bring us on board at an early stage.

Preliminary considerations regarding setting up a business – when is the best time?

At some point, the time will come to set up the actual limited company. The right time to make the transition from a civil-law partnership (GbR) to a GmbH or UG depends on many factors, which every start-up should weigh up carefully – and we’d be happy to help, of course:

Arguments in favour of starting a business later in life – not an exhaustive list!:

• A GbR is not as costly to maintain as a company limited by shares: there is no need to prepare and publish annual accounts, and changes to the list of partners and amendments to the partnership agreement can be made without notarisation. No minimum capital is required;
• In the case of a GbR, losses may be claimed for tax purposes at the level of the partners as part of their own income tax returns.
• Certain funding schemes require that a company has not yet been incorporated.
• Winding up a limited company if the project fails is quite expensive and takes a long time. A GbR can be dissolved immediately.

Arguments in favour of starting a business early – this list is not exhaustive!:

• In the case of limited companies, the liability of the shareholders is limited. This can be advantageous when significant expenses, such as office rent or initial contracts with customers, are due.
• The venture becomes „official“ – this creates a greater sense of commitment, which takes the project to a whole new level.
• As a limited company, its reputation in business dealings is growing.
• Certain funding schemes require that a company limited by shares has already been incorporated.
• Investors generally invest exclusively in companies.
• If assets have already been created within the GbR – for example, an initial prototype – there may be significant tax implications when the business is converted or transferred to a limited company. Key point: the realisation of hidden reserves.

The actual incorporation – and the paperwork

We will assist you in drafting your articles of association and shareholders’ agreement. We will tailor the provisions typical of start-ups to your specific needs and draw on our experience with start-ups when devising the framework and drafting the contracts. We coordinate the incorporation process with the notary and provide you with a roadmap setting out the individual steps to be taken.

From a tax perspective, the conversion of the GbR into a company limited by shares should be carefully planned to ensure that no hidden reserves are brought to light which would be subject to tax.

From a tax perspective, it is worth considering whether the use of holding UGs as an intermediary would be appropriate, so that dividends and capital gains can be reinvested virtually tax-free.

Day-to-day operations – structured and legally compliant

Once the company has been set up, there are, of course, a number of contractual agreements to be drawn up. We draft and review contracts with customers and suppliers, terms and conditions, privacy policies and similar documents.

Employee Share Schemes & Virtual Shares – to conserve resources

Start-ups suffer from a chronic lack of funds. In order to attract and retain qualified talent for the company despite this, the question of employee share schemes inevitably arises sooner or later. From a tax perspective, the most important consideration here is the Granting of virtual shares Please feel free to contact us regarding the drafting of such agreements.

Funding rounds – growth on fair terms

To turn big ideas into big success stories, capital is needed. In the early stages of start-ups, this comes from business angels and venture capital investors. Our clients include both investors and the start-ups themselves – although, of course, we advise only one side in each case. However, as we understand the fundamental perspectives of both sides, we are able to negotiate – and draft – investment agreements in a way that optimises interests whilst remaining effective.

Exit – Selling the Business Successfully

The ultimate goal of start-ups, particularly when investors are involved, is the exit – that is, the sale to a financial investor or a strategic investor. We support the start-up in planning and preparing for an exit, particularly with regard to the inevitable due diligence process. We then draft and negotiate the necessary contracts with you – term sheets, purchase agreements and transfer agreements. Naturally, we also draft and negotiate these contracts in English – should this be required.